The implosion of FTX last fall dealt crypto a black eye, bruising the nascent industry’s reputation in terms of legitimacy and trust. And according to Ava Labs CEO and Founder Emin Gün Sirer, the damage that Sam Bankman-Fried caused is “immeasurable”.
“All of that goodwill that we built over many, many years of hard work is just usurped by some guy who comes in and puts on this boy genius act,” Sirer said on the latest episode of the gm from Decrypt podcast.
Sirer has seen the digital assets industry “blossom from nothing” into what it is today. He worked hard as a professor of computer science at Cornell University to foster education around blockchain technology, such as briefing politicians and hosting workshops. He said the thought of how far Bankman-Fried set the industry back is something that keeps him up at night, conscious of shifting tides in regulatory circles that could be “very bad” for those that are involved in crypto.
As digital asset prices careened downward last summer, the reputation of FTX founder Sam Bankman-Fried ascended to new heights, as the 30-year-old entrepreneur was compared to John Pierpont Morgan in 1907 for rushing to save embattled crypto firms.
But last November, Bankman-Fried’s reputation swung in the opposite direction as FTX collapsed. The company filed for bankruptcy after a run on the exchange was sparked by a steep drop in FTX’s FTT token, which revealed FTX did not have one-to-one reserves of customer assets and could not honor withdrawals. Bankman-Fried was then arrested and charged with a litany of financial crimes, ranging from fraud to money laundering, for allegedly misappropriating billions of dollars worth of customer funds. He’s pleaded not guilty, and while additional charges were tacked on last week, the FTX founder has been likened to Bernie Madoff by some of his former business partners since his empire came crumbling down.
Sirer attributed the lack of scrutiny that Bankman-Fried received to the image the FTX founder cultivated, from his “tousled hair” to spending “so much on marketing that the world [treated] him as a genius that cannot be questioned.” Dealing with the aftermath of FTX’s collapse—which included the failure of dozens of other companies and projects caught up in the contagion—will hinge on establishing a constructive dialogue with regulators, Sirer said. It’s essential to distinguish to lawmakers that FTX’s fate was the failure of a centralized entity and not a failure of crypto itself in “any shape or form,” he said.
The FTX saga has sent Sirer searching for a silver lining. While he recognizes that a lot of retail investors were harmed by FTX’s swift implosion and the resulting contagion that spread to other businesses, he said he believes the damage would’ve been greater if left unchecked for longer.
“If we had given Sam a couple more years of runway, it would have been far worse,” he said, referencing how retail investors and venture capital firms were negatively impacted.
Another consolation is how Bankman-Fried has thrust digital assets into the mainstream as a result of his alleged mismanagement of FTX, putting certain tokens on the public’s radar. “I no longer have to educate people on what Bitcoin [or] Ethereum is,” he said.
Sirer said he’s also relieved that Ava Labs was never a so-called Sam coin, tokens championed by the disgraced crypto mogul which were allegedly inflated in price, including Solana and FTX’s exchange token FTT. “We were never a Sam coin, so we stayed out of that whole craziness,” Sirer said. “We’re just thanking our lucky stars for it.”
The damage that Bankman-Fried did to the digital assets industry is immeasurable. He managed to undo the years of hard work that many people in the industry put in to foster education and build trust in crypto. He also caused a lot of harm to retail investors, venture capital firms, and other businesses that were caught up in the contagion of the FTX collapse.
However, the FTX saga has also had some positive effects. Bankman-Fried has thrust digital assets into the mainstream, and Ava Labs managed to stay out of the “craziness” of being a Sam coin.
At the end of the day, it’s essential to distinguish to lawmakers that FTX’s fate was the failure of a centralized entity and not a failure of crypto itself. Establishing a constructive dialogue with regulators is key in order to ensure that the industry does not suffer from further damage.
It’s clear that the damage that Bankman-Fried did is immeasurable and will take a long time to undo. But with constructive dialogue with regulators and a focus on the positive effects of the FTX saga, the digital assets industry can continue to blossom and gain more legitimacy and trust.